The “Bart” — sudden hundreds-of-Bitcoin pumps or dumps, to burn the margin traders

The “Bart” — sudden hundreds-of-Bitcoin pumps or dumps, to burn the margin traders

My idea of fun is watching the Bitcoin price on Coinbase — preferably the 1-minute candle charts. I favour Coinbase because it’s the biggest exchange dealing in actual US dollars. You can see the pumps and dumps happening in real time!

There was a purchase of over 1000 BTC around 12:10 UTC today, which pumped the price $120:

I got email asking about it. I explained that this sort of thing happens all the time — because the crypto markets are really thinly traded.

You’ll typically see huge pumps, then stability for a few hours, then a huge dump. Crypto watchers call these “Barts”, ‘cos they look a bit like Bart Simpson’s haircut.

These aren’t just a crypto thing — you’ll see them for all manner of thinly-traded commodities in ill-regulated markets, or in forex.

The motivation is to burn margin traders, whether short (betting the price will go down) or long (betting it’ll go up) — you’ll see a Bart when it’s profitable to manipulate the number that a derivative depends upon. Pump or drop the price a hundred dollars, win the margin bet against someone who bet the other way.

(And … they eat your shorts.)

Some think this is the exchanges deliberately burning the shorts. This is possible — crypto is all but unregulated, though this sort of thing is why the CFTC is engaged in a criminal investigation into the Bitcoin markets — but really, it could just be the large traders — the whales.

(Who work very closely with the exchanges, so.)

This is why the SEC keepsrefusing to approve a Bitcoin exchange-traded fund — the market is too thin, and really obviously and easily manipulated. Other cryptos are even worse. I’m still surprised the CFTC lets the CME/CBOE Bitcoin futures happen.

Finance journalists need to stop treating crypto as an efficient market that responds to concerns. It’s a thinly-traded unregulated playground for whales, out to wreck the margin traders. A $400 dip in fifteen minutes is not a “market signal” — it’s a deliberate dump to manipulate the price.

Though there’s still downward pressure on the price — all the suckers from the bubble have gone home, so they’re not buying … but the miners still have to sell coins for actual money to pay for their electricity.

So one minute you’ll see a sudden $100 increase in the price that cost 130 BTC of dollars — and those are actual dollars going in — followed the next minute by a matching $100 drop that came from selling only 30 BTC. It’s much easier to drop the price than raise it.

I expect much more soap-opera fun for the sort of people who watch crypto market charts, e.g. me.

This is quite important stuff to know for any trader. I will still argue, however, that the only way for the price to increase, even in the intermediate term (e.g. days) is for somebody to buy BTC with real currency such as USD. If the sellers have to be paid in real USD, how else could the price go up?

Same thing on the downside, if there are people willing to sell at or below the current price, and they are going to be paid USD, and nobody is willing to pay them in USD, the price will have to go down.

So the real question is – who is buying now? who is putting in USD? There must still be people who want to sell.

I’m presuming the consistent sales pressure is from the miners – particularly as they’re operating on a very thin margin now, if any. Not sure who’s still interested in buying, but quite a lot of the buying is clearly people pumping the price because they need number not to go down.

Bitfinex has an internal trader who is probably privy to all sorts of inside data and who does large trades for an unknown small group (cough, cough owners of Bitfinex). It would be easy for them to print up a bunch of counterfit tether, pump the price of bitcoin, confiscate the bitcoins of the leveraged shorts, then dump these confiscated coins on another exchange for real USD to cover the counterfit tether print. Perpetual money machine.

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